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Rural poverty is widespread in Latin America and creating conditions for rural development should be one of the pillars of any poverty alleviation strategy in the region. This paper argues that growth in the livestock sector can significantly contribute to poverty reduction in Latin America.
First, a large share of the rural poor depend on livestock for part of their livelihoods; second, the demand for animal food in the region is estimated to increase by almost ¾ by 2030; third, Latin American consumers mainly demand traditional, low-processed food items, which the poor livestock producers are well able to supply.
Decision makers should not disregard the poverty-reduction potentials of livestock sector growth when formulating rural development and poverty alleviation strategies.
Key words: Latin America, livestock, poverty
La pobreza rural en Latinoamérica está muy extendida y el crear condiciones para el desarrollo rural debe ser uno de los pilares de cualquier estrategia para aliviar la pobreza en la región. Este artículo sostiene que el crecimiento del sector pecuario puede contribuir significativamente a la reducción de la pobreza en Latinoamérica.
Primero, una gran proporción de los pobres del sector rural dependen en parte del ganado como su medio de subsistencia; Segundo, la demanda de alimentos para el ganado en la región se estima crecerá cerca de ¾ en el 2030; Tercero, los consumidores en América latina demandan principalmente alimentos tradicionales y con poco procesamiento, los que pueden ser suministrados por los productores de ganado de bajos recursos.
Cuando se formulen estrategias para el desarrollo rural y para la mitigación de la pobreza, los decisores de política no deben ignorar el potencial que tiene el crecimiento del sector pecuario para la reducción de la pobreza.
Palabras clave: Latinoamérica, ganado, pobreza
Significant progress has been made in reducing rural poverty in Latin America in the last decades, but the poverty incidence remains high in rural areas. Pro-poor rural development can thus contribute to alleviate overall poverty in the region. The pathways out of poverty in rural areas are multiple, including agricultural specialization and industrialization, off-farm activities, migration and social transfers. In recent years, diversification into high-value agricultural products is increasingly appreciated as a promising way out of poverty for many rural dwellers High-value agricultural products are either those having a high-return per unit/input or those going through successive value-adding transformations, such as agro-industrial processing (CIAT 2005; FAO 2004).
Despite notable successes, the majority of Latin American smallholders are still excluded from high-value agricultural markets (USAID 2005). Supporting diversification and specialization into high value agricultural products requires therefore developing policies which provide incentives to farmers to shift to a new portfolio of activities and/or production practices, thereby getting a foothold on a pathway out of poverty. This paper argues that a policy focus on high-value livestock products holds promise to significantly contribute to rural poverty reduction.
The latest estimates of the United Nations Economic Commission for Latin America and the Caribbean show that about 35.1% of the population is poor in the region, of which 12.7% live below the indigence line. The poverty headcount index is higher in rural (53.6%) than urban areas (29.8%) (CEPAL 2007). Whereas the poverty incidence and the number of poor are what ultimately matters, it is the trend in poverty that counts for policy makers. In the last decade the policy record in dealing with poverty has been to some extent disappointing in Latin America: despite the poverty headcount index having declined since 1990, the total number of poor has increased since then. Rural areas have performed better than urban ones, with a reduction of both relative and absolute poverty, but the main source of gains in reducing the number of rural poor has been in population shifts to cities and towns as opposed to successful rural development (Figure 1).
Figure 1 hides heterogeneity among countries. For instance, in the last decade Chile has recorded an impressive reduction in relative and absolute poverty: about 14% of the Chileans were poor in 2006, with no significant difference between urban and rural areas. On the contrary, Central American and Andean countries have shown little progress in rural poverty reduction in the last decade: today, the rural poverty headcount index ranges between 70% and 80% in Bolivia, Honduras, Nicaragua and Peru (CEPAL 2007).
The above picture suggests that policy makers in Latin America should not disregard investing in rural areas if the Millennium Development Goals are to be achieved, both because of the higher incidence of poverty in rural areas and the rural underpinning of urban poverty (Echeverría 2000; de Ferranti et al 2005; Lewin 2003). There are three major ways through which the poor can benefit from rural development: first is through off-farm and non-farm employment generation (e.g. agribusiness development); the second mechanism is through increased access to productive assets (e.g. land reform); the final channel is by enhanced returns to and productivity of the assets that the poor already own (e.g. technological change). Since most of the rural dwellers are smallholders and the majority of smallholders are poor, from 7% in Chile to over 50% in Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay and Peru (CEPAL 2007), policies increasing the returns to and productivity of their scarce assets hold promise to contribute to poverty reduction widely.
In recent years, there is growing consensus that agricultural diversification into high-value products might be an effective way to increase the returns to agricultural and other assets (e.g. land and labour) and facilitate smallholders escaping poverty: “There are opportunities for developing countries [...]. This will include moves away from the production of traditional staples, to high value products (including, for example, fruits, vegetables, fish, livestock products, horticulture, etc.)” (CGIAR 2004 p.5; Barghouti et al 2004; CIAT 2005; Davis 2006; Hartwick et al 2008).
There are a number of successful instances of high-value product supply chains (cadenas productivas, cadenas de valor, alianzas productivas), which have contributed to increased income among small rural producers in Latin America. Examples include smallholder coffee production in Chiapas, broccoli and cauliflower in Guanajuato, and swine raising in Sonora, Mexico; llama fibre production in the Department of Potosi, and parsley production in the Department of Chuquisaca, Bolivia; ‘maca’ tuber exports from the Andean region to North America to be used as a dietary supplement; smallholder grape and codfish exports from Chile; tomato, lettuce, cabbage, cucumber, bell pepper, and spring onions production along the Paraná river in Brazil; snow pea exports from Guatemala; and asparagus exports from Peru (Field et al 2005; Hernández Moreno 2001; Key and Runsten 1999; Paz and Gandarillas 2005; Peña et al 2005; Smith et al 1995; World Bank 2005). Though encouraging, these cases are on a relatively small-scale and need to be scaled-up to significantly contribute to poverty alleviation (USAID 2005).
High-value products in Latin America have been traditionally associated with horticultural crops, though the livestock sector presents comparable, if not larger, pro-poor development opportunities.
(i) Livestock products have a high value added given the length and complexity of their production chain. For instance, the simplest cattle production chain would entail: cattle raising, livestock delivery to holding grounds; stunning/slaughtering; hide removal/de-hairing; evisceration; trimming and carcass washing; boning; chilling; packaging; storing; transporting to wholesalers; distributing to retailers; consumption. These steps clearly add value to the final product: in Chile, for instance, in 2001 the difference between farm-gate and consumer price was estimated at about 290% for beef, pig-meat and poultry, and 190% for milk (FAO / ESCB 2004). The policy issue is thus about the distribution of these benefits along the value chain. For example, the liberalization of the Brazilian dairy sector, including retail and farmgate prices, is leading to concentrated production at the farm level, with many small producers forced out of the sector (Costales et al forthcoming); conversely, the Camelid Development Strategy of Peru (GOP 2005), which explicitly aims at supporting an equitable development of the alpaca sector, would possibly contribute to poverty reduction among the “alpaqueros” of the Andes.
(ii) Although extensive ranches have long been the dominant form of ruminant production in Latin America, and poultry, swine and dairy production are displaying increasing concentration due to standardized available technologies (Delgado et al 2003; FAO 2002; Jarvis 1986), a large share of the rural poor in the region are small farmers living on non-professional agriculture and tending some livestock (Figure 2).
ILRI estimates that about 49% of the rural poor hold livestock in Central America, 15% in Mexico, 39% in the Andean countries, 29% in the Southern Cone countries and 36% in Brazil (Thornton et al 2002); according to IFAD (2002), the three largest groups of rural poor in Latin America – indigenous communities, small farmers, and subsistence and landless farmers – are dependent on livestock for part of their livelihoods. Unfortunately, there are no comprehensive estimates on the contribution of livestock to the income of the poor in Latin America, which is usually in the range of 70-80% in pastoral areas, 10-20% in mixed rainfed production systems, 25-35% in irrigated zones, and 1-2% in urban and peri-urban areas (Pica-Ciamarra 2005). Some preliminary findings from household surveys indicate that about 24% of the total income of the poorest originates from livestock in Ecuador, 10% in Nicaragua and Panama, and 3% in Panama (Davis et al 2007); in two smallholder campesino farming areas of the highlands of Central Mexico, the annual contribution of livestock to household income is estimated to be 38% of the running minimum wage (Arriaga-Jordán and Pearson 2004).
(iii) Livestock is not an entirely new business for most of the Latin America rural poor and relatively minor changes along the supply chain are often sufficient to boost livestock production and productivity. In the Bolivian Department of Santa Cruz, for instance, the implementation of simple, cheap technology –e.g. the building of night shelters to protect chickens and guinea pigs from predators, and the construction of farrowing bays to reduce the danger of piglets being crushed by their mothers or other larger animals– resulted in increased household annual income of over US$ 200, which is equivalent to about two months of causal work (Paterson and Rojas 2004); in Honduras, the establishment of 62 small milk collection and cooling centres in rural areas is estimated to benefit about 1,300 small dairy producers, who were able to market their surplus produce and get a relatively high and stable price for their milk (FAO 2008a).
(iv) Livestock can be raised in the different agro-ecological zones of the continent – from the Argentinean pampas to the tropical Caribbean coast of Colombia, from the Andean highlands to semi-arid northern Mexico – and improved use of existing livestock might contribute widely to both increased supply of animal protein and increased staple production via animal-crop complementarities.
(v) Livestock production, with some relevant exception, mainly targets local consumers. According to the latest FAO estimates, in Latin America about 18% of livestock production is exported versus 29% of fruit and vegetable production; in value terms, the trade balance for fruits and vegetables is about five times higher than that of livestock products (FAO 2008b). Furthermore, increased population, per-capita income growth and urbanization are strongly sustaining the local demand for animal food –FAO (2002) estimates that in Latin America meat consumption will increase from 30 million metric tons in 2000 to 55 million in 2030 (+83%), and milk consumption from 56 million to 100 million metric tons (+78%)– and the largest share of this demand will be for low processed and low-medium quality livestock products, which can be well supplied by small producers. Consumers with an annual income below US$ 2,000 will in fact hardly participate in livestock markets; those with an annual income between US$ 2,000 and 7,000 will purchase either wet products or inexpensive and partially processed food items; those with an income above US$ 7,000 per year will demand safe and high-value processed food; finally, consumers having an annual income above US$ 26,000 will look for high-value processed, convenience and healthy products (Aho 2004). In Latin America, the average annual per-capita income is about US$ 7,000, ranging from US$ 3,000 in Bolivia to about US$ 13,000 in Chile and, given the skewed wealth distribution, the median income will be significantly lower (CEPAL 2007, World Bank 2008). It follows that the majority of Latin American consumers will demand low processed livestock products in the coming years.
(vi) Finally, livestock production is labour intensive compared to staples, especially dairy farming where labour can account up to 85% of total costs (IFCN 2004). Livestock also generates backward and forward linkages: Huss (1996) speculates that in Latin America a minimum of 3 jobs are generated by each small livestock producer, and that about 17% of the region’s total population, or 50% of the total economic active population, is directly or indirectly employed in the sector; more reliable figures from Kenya indicate that the over 600,000 dairy households in the country generate about 365,000 waged jobs (i.e. about 50 full-time wage-labourers per 1,000 litres of milk produced on a daily basis) (SDP 2004).
Agricultural growth is critical for Latin America to achieve the Millennium Development Goals. Livestock could be a critical component of such growth: a large majority of the rural poor hold livestock, there is a growing demand for livestock products in the region; the average Latin American consumer still demands low-processed food items.
Supporting smallholder livestock productivity, however, does not necessarily imply that the poverty-reduction returns to investing into smallholder livestock production are higher compared to alternative policy options, which should be explored. There are, though, two arguments to sustain smallholder livestock production. The first is that there is ample empirical evidence that poor smallholders can be as productive as large farms per unit of land and, possibly, per livestock unit, as economies of scale are largely in processing and marketing activities. The second is that the development of large capital intensive production farms, while forcing out of the markets inefficient smallholders, does not always generate enough demand for the displaced labourers, forcing them to urban migration. Unfortunately, only a small proportion of them finds productive employment in modern urban industries, and most derive their subsistence from informal economic activities. Supporting a broad-based and inclusive development of the livestock sector, therefore, might trigger an “alternative path of economic development” (Hayami 1998), which is not the self-contained development of the rural sector but is the expansion of small-medium on-farm, off-farm and non-farm agricultural and industrial activities in rural areas, promoting both economic growth and poverty reduction.
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Received 26 July 2008; Accepted 22 October 2008; Published 1 January 2009
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